Billions on the line: What the House-passed budget means for students

In this episode, OSBA's Scott Gerfen and OSBA Director of Legislative Services Jennifer Hogue discuss Ohio's $61 billion budget, which has passed the House and now heads to the Senate. The conversation covers significant changes to district cash balances, the impact on school funding and student services, and the property tax relief efforts.

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Transcript

SPEAKER_01 0:00

Hey everyone, it's OSBA Scott Gurfin. Ohio's $61 billion budget has cleared the Ohio House and it's now headed to the Senate. What does it mean for public education? We're going to talk about it with OSBA's Director of Legislative Services, Jennifer Hogue. And before we get started, I want to thank our sponsor, Papist and Associates, for helping make this podcast possible. Jennifer, thanks for joining the podcast. Thanks for having me. So the Republican-controlled House has passed its version of the budget. I want to start right off the bat with cash balances, a district's cash balance. Tell me what this budget is going to do for a district's cash balance.

SPEAKER_00 0:46

Yeah, so pretty big changes around cash balances. What the bill would do is it would require districts to submit their three-year forecast rather than a five-year forecast, a three-year forecast to the county budget commission. It also changes the makeup of that county budget commission. So today it is the county auditor, county treasurer, and county prosecutor. The House has proposed and put in their bill removing the county prosecutor and replacing them with the president of the board of county commissioners. So that would be the budget commission. For every district that has a cash balance above 30% of their prior year operating expenses, they would need to take tax rates in that district that voters have approved to be used for the education of students in their communities. And they would roll those rates back until a district no longer had a cash balance above 30%.

SPEAKER_01 1:37

So when we're talking about this res, we call it reserve, the cash balance. Can you compare it to like a family budget where a family a family might be saving for like a big purchase, like a car, a college? Um, can you equate that to where districts are looking, you know, so they don't have to go on the on the ballot again, right?

SPEAKER_00 1:58

Yes. So it's somewhat similar. Um the thing to keep in mind is that um a lot of legislators seem to talk about this in as being an emergency savings account, a reserve, a rainy day fund, and that's just sitting there untouched. Um, it's more like your family checking account. So funding comes into the district and funding flows out as expenses are incurred. And so um districts receive money a couple of different ways. From the state, they get payments twice a month. Um, and from the county, local receipts that they get, they get those up two times a year. Um, and so when those payments come in, there will be more money in that account. And as payments are made for expenses in the district to serve kids, those amounts will go down. Um, there are also lots of reasons why a district will have a cash balance over 30%. And there are good fiscal stores of this money and want to make sure that they are making it last. So when we think about a levy cycle, um, let's say, for instance, a levy is five years. Um, you know, in the first couple of years, when you pass the levy, you collect extra, um, a little more than you need to be spending, because you know in those off years, you're gonna potentially be growing as a district. You're gonna see new student needs. Um, costs of goods and services are gonna be more expensive in year five than they are in year one. And so to make that money last that five years without going back to voters again, um, districts will collect more than they're spending, having a higher cash balance. But in those off years, that money gets spent down to meet student needs. Um, and so that could be one reason. We also have districts that pass bond levies, and oftentimes they'll pass right along with it an operating levy to be able to staff those buildings and serve students as that building comes online if they're a growing district, and so they may have dollars there to be used in those ways. Um, you may also have districts, particularly our rural and Appalachian districts, that haven't had access to the facilities construction commission money. Many of them have maintenance needs for their buildings, and so they'll put away a little bit here and there, saving up over time to be able to do these larger projects that are needed for the health and safety of students, but be able to do it in a way that doesn't require them to go back to voters and ask for more money immediately. And what we've seen just this week is another new reason you may have money in there are the pipeline districts. Um, Nexus settlement payments just hit districts this week. Um, and so that funding is now in their bank accounts and showing at um on their cash balance um reports. And so um, you know, that's money that should have been given to be used for students and will be used for students over time, but to penalize a district or take away the ability of a community to be able to levy dollars to provide extra resources for kids is not the solution. Another reason you might see cash balances that look a little higher in some districts is the state and local share. So Ohio is a shared responsibility for public education. There's a state component and a local component, depending upon um the school funding formula. Um the districts that receive the lowest amount from the state get just 10% of their funding coming from the state. So 90% of that is generated locally and will be appearing um two times a year when those payments are made in those bank accounts.

SPEAKER_01 5:05

So when we're talking about this cash balance, uh if it does go into effect, if it does pass, clear the Senate, get signed by the governor, then are taxpayers, our homeowners then just going to get a check in the mail that for, you know, this is was the how does that work here?

SPEAKER_00 5:24

Yeah, that is not how it will work. So what will happen is the tax collections in those districts over 30% will be rolled back by the budget commission, causing future collections not to occur. Districts will still have the money on hand to meet student needs, but when that runs out, you know, no one's really getting a check in the mail.

SPEAKER_01 5:44

And the other thing I want yes, the other thing I want to touch on too is uh property tax relief. Uh we've been working with the legislature on a number of bills, right? I mean, it's we're we're not opposed to tax relief.

SPEAKER_00 5:58

Correct. And I think, you know, if you talk to any of our members, they're hearing from the same constituents that our legislators are hearing from about um the property taxes that have gone up because the valuations going up and the concerns that are there. And so we are engaging in conversations at the state house around property tax reform. I think we have about 30 bills between the House and the Senate that are on the table, in addition to this that they have put in the budget. Um, and so we're engaging in those conversations and welcome, um, collaborating in a way that provides property tax relief for citizens in a way that also protects the ability of students to have the resources that they need in their local communities as well.

SPEAKER_01 6:34

So when we look at this budget that did pass the House, uh what is what is it in terms of uh the school funding? Is did that change at all? I think it was something in the neighborhood of what, 200 million uh for the next two years for public education, or do I have that wrong?

SPEAKER_00 6:52

Nope, you're right about there. I think it's like 226. Sometimes I hear 236. So around in the 200 million range for public education. Um, the house took a little bit of a different tactic than the governor. The governor, if you'll remember, just phased in years five and six and then looked to reduce guarantees over the next couple of years of the biennium. Um, the house took a very different approach. Um, so they are starting out really making sure every district gets what they got in fiscal year 25. Um, and then they run the formula and it um back out what you got in 25. And if that's a positive number, you get that added to your fiscal year 25. And then there are two additional pots of money. So every district will get an additional $20 per pupil in the first year and $30 per pupil in the second year. And then there's also a growth supplement. So if you're a district that has seen enrollment growth above 3% in the last five years, you will get additional dollars as well. And so we're seeing every district get an increase. Um we're disappointed to not get the fiscal year 24 inputs that we were asking for. But the the change that was made in the house ensures that every dollar, the extra that was put into the formula, went to a public school district versus growing the vouchers because those two amounts are now tied as one, the base cost grows on one, the base cost for the voucher amount grows as well. So this ensured that those dollars went straight to district.

SPEAKER_01 8:10

So help me understand the fair school funding plan then. It is still in place, right? Except explain the cost input and what that means.

SPEAKER_00 8:18

Yeah. So the cost input is takes a look at what does it cost to educate um a typical student in the state, which we know no student is typical, but the the needs that every single student has regardless of their circumstances. And then that figures out the base cost. Um the governor's budget proposed to use fiscal year 22 input, so the actual data from districts about what they're spending in those categories that constitute the base cost. Um, and we had asked for that to be adjusted to fiscal year 24 to account for inflation. Um, and so that's how that formula works.

SPEAKER_01 8:49

So tell me a little bit about the next steps. Uh the the process for the budget, it now goes to the Senate, correct?

SPEAKER_00 8:56

Correct. So we're now moving over to the Senate. Um, one of our main focuses is going to be asking the Senate to remove this cash balance process and procedure to reduce funding to districts. Um, we need to make sure that they understand the unique circumstances of districts. Um, we have talked a lot about all of these reasons that could be that I cited today, but it's really important that they hear from you and understand why the cash balances in the districts that they represent and the communities that they also serve, and making sure that they understand what a reduction in the funding that you are bringing in to meet student needs will mean for a student. Um, what you're planning to do with those dollars and what students will be missing when they're gone. Um, it's extremely important that they understand that um, to make this decision quickly in a budget process without being able to understand those are going to have significant ramifications on students. And we need to make sure that the Senate hears that.

SPEAKER_01 9:49

So uh we are are counting on our districts to get out and tell their story. They need to do yes.

SPEAKER_00 9:56

Yes, that you all did a great job of showing up and speaking up um during the House process. Um, we are not done. Um, there's still a lot of this game to be played. So please make sure you're engaging in the Senate. Um, you know, every contact that you make with a legislator shares your story and makes a difference.

SPEAKER_01 10:13

So uh when we talk about the process, so it goes to the Senate. The Senate will obviously have its its version, and then tell me what happens after that.

SPEAKER_00 10:23

So the Senate won't make their changes to the bill. Um, once they're finished, they'll vote on the bill in the Senate. Um, that then goes back to the House because they will definitely make changes in the Senate. I've never seen a budget they don't. And the House will take a look at what the Senate has done and they'll decide either yes, we like this or no, we don't agree with the changes that the Senate made. Um, I've also never seen the House say, yes, we like what the Senate did in the budget process. So then we'll probably end up in what's called a conference committee. Um, that is a committee made up of three representatives and three senators, two from the majority party in each chamber and one from the minority party in each chamber. Um, what happens behind the scenes is there's a lot of figuring things out, discussions between the House and Senate, also them checking in oftentimes with the governor and the executive branch as they sort of craft their compromises. And there's a lot of give and take. And then the committee will convene and we'll see what's called the conference committee report, and it'll be that final budget bill. Um, the conference committee will vote on that, and then it goes to both chambers at the same time, the house and senate, and they can only decide yes, we agree or no, we don't. Um, so we've got a long way to go. All of this needs to be completed by June 30th.

SPEAKER_01 11:32

Yeah, the governor would have to sign and he also gets the veto things that he would like.

SPEAKER_00 11:38

And help line out a veto authority because it is an appropriations bill. So he could carve out things.

SPEAKER_01 11:43

So just to recap, uh the cat the cash balance is is the biggest thing coming out of this budget that that just cleared the house. And again, it it initially had been 25% that a district could keep, but that's been raised now to 30%. But we're still talking about five, what, five billion dollars potentially that districts would be like I think with the change.

SPEAKER_00 12:05

Yeah, the change from 25 to 30 percent is about a 4.2 billion dollar um decrease, is what I've heard the numbers cited as being.

SPEAKER_01 12:14

Uh, one other thing I I wanted to bring up as well is uh you guys are going to have a webinar coming up on April 22nd, correct? That would go more into detail on everything that's in the budget right now, right?

SPEAKER_00 12:26

Yes. So the budget just passed the House yesterday. We are still unpacking it and trying to find everything in there, but we are partnering um with our colleagues at BASA and OASBO, and we'll be doing that webinar on the 22nd, April 22nd at noon, um, to go through all of the things that are in the House budget and make sure members are well informed and ready to head into the Senate deliberations.

SPEAKER_01 12:46

Uh Jennifer, thanks so much. Uh any final thoughts? As uh I know it's uh it took a long time, it seems like, to get to this point, but we, like you said, we still have a long way to go.

SPEAKER_00 12:58

We do. And we cannot get weary. We've got to remember that we are speaking for kids and fighting for their futures. And so it's really important that no matter how tired you are or how hopeless things might seem from time to time, that you continue to show up and speak out because it's really important that we make sure that every child in the state has access to a high-quality, well-funded public education that's gonna prepare them for a successful future.

SPEAKER_01 13:20

Jennifer, uh, thanks for coming on the podcast. Always some good information, uh, some timely information considering the budget just uh got out of the house yesterday. So I appreciate you coming on the podcast.

SPEAKER_00 13:31

Thanks for having us.

SPEAKER_01 13:32

And thank you to our sponsor, Papis and Associates. They are shaping policy with integrity.